6 Reasons Why We're Underhyping the Internet of Things

Daily Herald (Arlington Heights, IL), June 28, 2015 | Go to article overview

6 Reasons Why We're Underhyping the Internet of Things


Byline: Dominic Basulto Special to The Washington Post

6 reasons why we're underhyping the Internet of Things

Just when you thought the Internet of Things couldn't possibly live up to its hype, along comes a blockbuster, 142-page report from McKinsey Global Institute ("The Internet of Things: Mapping the Value Beyond the Hype") that says, if anything, we're underestimating the potential economic impact of the Internet of Things. By 2025, says McKinsey, the potential economic impact of having "sensors and actuators connected by networks to computing systems" could be more than $11 trillion annually.

According to McKinsey, there are six reasons we may be underhyping the Internet of Things.

1. We're only using 1 percent of all data

What McKinsey found in its analysis of more than 150 Internet of Things use cases was that we're simply not taking advantage of all the data that sensors and RFID tags are cranking out 24/7. In some cases, says McKinsey, we may be using only 1 percent of all the data out there. And even then, we're only using the data for simple things such as anomaly detection and control systems -- we're not taking advantage of the other 99 percent of the data for tasks such as optimization and prediction. A typical offshore oil rig, for example, may have 30,000 sensors hooked up to it, but oil companies are only using a small fraction of this data for future decision-making.

2. We're not getting the big picture by focusing only on industries

Rather than focusing on verticals and industries (the typical way that potential economic value is computed), McKinsey takes a deeper look at the sweeping changes taking place in nine different physical "settings" where the Internet of Things will actually be deployed -- home, retail, office, factories, work sites (mining, oil and gas, construction), vehicles, human (health and wellness), outside (logistics and navigation), and cities. Of that $11 trillion in economic value, four of the nine settings top out at over $1 trillion in projected economic value -- factories ($3.7 trillion), cities ($1.7 trillion), health and fitness ($1.6 trillion) and retail ($1.2 trillion).

Thus, instead of focusing on, say, the automotive industry, McKinsey spreads the benefits of the Internet of Things for automobiles over two different physical settings -- "vehicles" and "cities." In the case of vehicles, sensors are a natural fit for maintenance (e.g. sensors that tell you when something's not working on your car). In the case of cities, these sensors can help with bigger issues such as traffic congestion.

3. We're forgetting about the B2B opportunity

If you think the Internet of Things is just about smart homes and wearable fitness devices, think again -- McKinsey says the B2B market opportunity could be more than two times the size of the B2C opportunity. One big example cited by McKinsey is the ability of work sites to take better advantage of the Internet of Things.

Think of an oil work site, for example. You have machinery (e.g. oil rigs), mobile equipment (trucks), consumables (barrels of oil), employees, processing plants and transportation networks for taking this oil out of the work site. If all those elements are talking to each via the Internet, you can optimize the work site. Oil rigs can let employees know if something's broken, trucks can arrive on time to pick up the barrels of oil, and then all that oil can be processed and shipped off to wherever it's needed on time and on schedule. …

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